The Coinage Act of 1792 (footnote 1) initiated a new statutory system consistent American common-law tradition by continuing the use of silver, gold, and copper as “Money.”(footnote 2)Second, it reiterated the judgment of the Continental Congress and the Constitution that “the money of account of the United States shall be expressed in dollars or units,” (footnote 3) and defined the “DOLLARS OR UNITS” in terms of weight, as “of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure * * * silver.” (footnote 4)

Recognizing that to adopt Hamilton’s suggestion of a “gold dollar” would cause confusion and require constant governmental supervision to “regulate * * * Value[s],”(footnote 5) Congress created no such coin, instead mandating the coinage of “EAGLES,” “each to be of the value of ten dollars or units,” (footnote 6) that is, of the weight of fine gold equivalent in the marketplace to 371.25 grains of fine silver. Following Hamilton’s recommendation, though, it fixed “the proportional value of gold to silver in all coins which shall by law be current as money within the United States” at “fifteen to one, according to quantity in weight, of pure gold or pure silver.” (footnote 7) And it made “all the gold and silver coins * * * issued from the * * * mint * * * a lawful tender in all payments whatsoever, those of full weight according to the respective values [established in the Act], and those of less than full weight at values proportional to their respective weights.” (footnote 8)

Thus, Congress did not establish a “gold dollar,” or enact a “gold standard,” as the popular misconception holds. For example, the Encyclopaedia Britannica erroneously reports that the “dollar * * * was defined in the Coinage Act of 1792 as either 24.75 gr. (troy) of fine gold or 371.25 gr. (troy) of fine silver.” (footnote 9) The Act did no such thing. It explicitly defined the “dollar” as a fixed weight of silver, and “regulate[d] the Value” of gold coins according to this standard unit (or money of account) and the market exchange-ratio between the two metals. Nowhere did the Act refer to a “gold dollar,” only to various gold coins of other names that it valued in “dollars.” (footnote 10)

Congress also provided free coinage “for any person or persons,” (footnote 11) and affixed the penalty of death for the crime of debasing the coinage. (footnote 12)

Footnotes:

1.) An Act establishing a Mint, Act of 2 April 1792, ch. 16, 1 Stat. 246. See the Appendix hereto.

The Mint Act of 1792 Defined the Constitutional “Dollar” Thereby Prohibiting Congress From Changing the Definition

This statute is significant in several respects. First, Congress determined as an historical fact the meaning of the term “dollar[ ]” as used in the Constitution (footnote 1)—to wit, the “Spanish milled dollar as the same is now current”, containing 371 1/4 grains of fine silver. (footnote 2) By the act of 1792 *** [t]he Spanish milled dollar, as the same was then current in use, was assumed as the standard. This fixed the meaning of the word “dollar” in the Constitution so that the U.S. monetary standard, the “dollar” to be coined by the United States was to be 371 1/4 grains of fine silver precisely so that Congress could not debase the coinage below the standard.

Second, Congress made crystal clear that the “unit” of the monetary system is the silver“dollar[ ]”: “Dollars or Units—each to be of the value of the Spanish milled dollar as the same is now current, and to contain [371 1/4 grains of pure] silver”; (footnote 3) and “the money of account of the United States shall be expressed in dollars or units, * * * and * * * accounts in the public offices and all proceedings in courts of the United States shall be kept and had in conformity to this regulation”. (footnote 4)

Third, Congress reiterated the understanding that the legal “Value” of “Money” is no abstraction subject to arbitrary definition, but consists in a coin’s actual weight in precious metal. (footnote 5)

So Congress did not create a “gold dollar”, or establish a “gold standard” or a “dual standard” as popular misconceptions hold. Nowhere did the Act refer to a “gold dollar”, only to various gold coins of other names that it valued in “DOLLARS”: “EAGLES—each to be of the value of ten dollars or units”, not be “ten dollars or units”. (footnote 6)

In a plan first published on 24 July 1784, Thomas Jefferson concurred that the Spanish dollar was the obvious choice to be the U.S. standard unit of ‘Money’.

In a plan first published on 24 July 1784, Thomas Jefferson strongly concurred that “[t]he Spanish dollar seems to fulfill all the[ ] conditions”applicable to “fixing the unit of money”. (footnote 1) “Taking into our view all money transactions great and small, ” he ventured, “I question if a common measure, of more convenient size than the dollar, could be proposed. (footnote 2) “The unit, or dollar,” he wrote, already equating one with the other, “is a known coin, and the most familiar in all the minds of the people. It is already adopted from south to north; has identified or currency, and therefore happily offers itself as an unit already introduced. Our public debt, our requisitions and their apportionments, have given it actual and long possession of the place of unit”. (footnote 3)

Footnotes:

1.) NOTES on the ESTABLISHMENT of a MONEY MINT, and of a COINAGE for the UNITED STATES, appended Propositions respecting the Coinage of Gold, Silver and Copper (printed folio pamphlet presented to the Continental Congress 13 May 1785), at 9.

2.) Id.

3.) Id. at 10

See Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution, (Chicago, Illinois R R Donnelly & Sons, Inc., GoldMoney Foundation Special Edition [2011] of the Second Revised Edition, 2002) by Dr. Edwin Vieira, Jr., Volume I, page 138-139.

It was Thomas Jefferson who suggested and explained why there had to be a precise ‘value’—that is, silver content—of the Constitutional Dollar.

“If we determine that a dollar shall be our unit, we must say with precision what a dollar is. This coin as struck at different times, of different weights and fineness, is of different values” (footnote 1). This, though Jefferson saw as a problem for economic science to solve through objective measurement, not as a matter for politics to dictate according to arbitrary “policy”. “If the dollars circulating among us be of every date equal, we should examine the quantity of pure metal in each, and from them form an average for our unit. This is a work proper to be committed to as well as merchants, and which should be decided on actual and accurate experiments” (footnote 2). “The proportion between the value of gold and silver, he added, is a mercantile problem altogether. (footnote 3). Given [t]he quantity of fine silver which shall constitute the unit”, and “the proportion of the value of gold to that of silver”, Jefferson went on, “a table should be formed *** classing the several foreign coins according to their fineness, declaring the worth *** in each class, and they should be lawful tenders at those rates, if not clipped or otherwise diminished.”

Footnotes:

1.) NOTES on the ESTABLISHMENT of a MONEY MINT, and of a COINAGE for the UNITED STATES , appended Propositions respecting the Coinage of Gold, Silver and Copper (printed folio pamphlet presented to the Continental Congress 13 May 1785), at 11.

2.) Id.

3.) Id. at 12 “Here the legislatures [of the States] should cooperate with Congress in providing that no money should be paid or received at their treasuries, or by any of their officers, or any bank, but on actual weight; in making it criminal in high degree to diminish their own coins, and in some smaller degree to offer them in payment when diminished” Id.

In this Act, Congress provided for “free coinage”: namely, that any person might:

“bring to the *** mint gold and silver bullion, in order to their being coined; and *** the bouillon so brought shall be *** coined as speedily as may be after the receipt thereof, and that free of expense to the person *** by whom the same shall have been brought. And as soon as said bullion shall have been coined, the person *** by whom the same shall have been delivered, shall upon demand receive in lieu thereof coins of the same species of bullion which shall have been delivered, weight for weight, of the pure gold or pure silver therein contained: Provided nevertheless That it shall be at the mutual option of the party *** bringing such bullion, and of the director of the *** mint, to make an immediate exchange of coins for standard bullion, with a deduction of one half per cent. from the weight of the pure gold, or pure silver contained in the said bullion, as an indemnification to the mint for the time which will necessarily be required for coining the said bullion, and for the advance which shall have been so made in coins.”(footnote 1)

Footnotes:

The Mint Act of 1792 affixed the penalty of death to anyone debasing the coinage.

The Mint Act of 1792, Section 19 reads:

“And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of the fine gold or fine silver therein contained, or shall be of less weight or value than the same out to be pursuant to he directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer death.”

In sum, the constitutional “dollar[ ]” the unit of “Money” or money of account of the United States , is an historically determinate, fixed weight of fine silver—a unit of measure equal in “intrinsic value” (weight and fineness) to “the common Dollars [Spanish Pieces of eight] that [were] current in the United States” in the late 1780s—adopted, not created, first by the American market and then by the Continental Congress well before the ratification of the Constitution. (footnote 7)